General Atlantic Takes Majority Stake in OneOncology, a Startup for Running Cancer-Doctor Practices

Posted on September 12, 2018

$200 million deal by private-equity firm is latest sign investors see opportunity in the health-services sector

ByMelanie EvansSept. 12, 2018 12:03 a.m. ET

Private-equity firm General Atlantic has agreed to invest $200 million in a startup that aims to manage independent cancer-treatment clinics, the latest sign investors see opportunity in the health-services sector.

The investment makes General Atlantic the majority owner of OneOncology, a startup that launched this month. Its founders, three cancer-treatment practices in Tennessee and New York, are the other owners and its first customers.

OneOncology, based in Nashville, Tenn., aims to address the challenges the practices face managing their operations, navigating patient insurance reimbursement, adopting information technology and negotiating drug-purchase contracts by taking over the administrative work.

Independent physician practices also often lack the capital needed to keep up with mounting costs for delivering cancer care and installing electronic record-keeping systems. Yet they can generate profits if administered the right way.

The heavy capital needs and high profit potential has driven hospital consolidation, said Jeff Vacirca, a OneOncology director who is chief executive of New York Cancer & Blood Specialists, a cancer-treatment group that is one of the startup’s owners.

Better-capitalized hospitals have been buying up the cancer-doctor practices, and businesses such as McKesson Corp.’s US Oncology unit are getting paid to run them.

OneOncology aims to provide an alternative to the other suitors, according to board members. The startup plans to acquire the assets of additional cancer practices, hire their nonclinical employees and use its heft to negotiate better terms for business services.

In return, the practices it acquires will receive an ownership stake in OneOncology.

The private-equity firm takes stakes in companies with the potential for strong growth, and sees high demand for cancer care given the prevalence of the disease and complexity of its treatment, said General Atlantic Principal David Caluori.

OneOncology will look to grow in part by financing consolidation of cancer-doctor practices, according to executives involved in the effort.